Rhode Island House approves $8.7B state budget

House Speaker Nicholas Mattiello, left, talks with Rhode Island AFL-CIO President George Nee before the start of the budget debate on June 12, 2014. (photo: Ted Nesi/WPRI)

PROVIDENCE, R.I. (WPRI) – The Rhode Island House passed General Assembly Democrats’ $8.7-billion tax-and-spending plan just after midnight Friday, moving to cut some taxes, nix the Sakonnet River Bridge tolls and make the next 38 Studios bond payment.

The House voted 63-12 to approve the proposed budget for the 2014-15 fiscal year almost exactly as drafted by the House Finance Committee. One of the chamber’s six Republicans – Rep. Joe Trillo of Warwick – also voted for the budget, which will now go to the Senate for what is expected to be quick approval.

It’s the first budget prepared under the leadership of new House Speaker Nicholas Mattiello, D-Cranston, who took over from Rep. Gordon Fox after the latter’s home and office were raided by law-enforcement agents in March. Fox, who remains a sitting lawmaker, was on hand for Thursday’s debate but did not speak.

The budget debate, which lasted from around 3:30 p.m. to 12:21 a.m., saw some spirited rhetoric but no substantive surprises; all efforts by rank-and-file lawmakers to change the leadership blueprint were easily defeated. There was a short break around 10 p.m. when apparently overloaded Web servers made the chamber’s voting machine malfunction.

House Finance Committee Chairman Raymond Gallison, the Bristol Democrat tapped by Mattiello to lead the powerful budget-writing panel, told his colleagues the plan “has some key elements that support the goal that the speaker and so many of you share, and that is to help the economy and grow jobs.”

“I guarantee you things are going to get better,” declared Rep. Charlene Lima, D-Cranston, a Mattiello ally. “The economy is going to turn around.”

Laurie White, president of the Greater Providence Chamber of Commerce, also expressed support for the budget. “Reducing the corporate tax rate, eliminating the estate tax cliff, and investing in job training and economic development projects, will make Rhode Island more competitive, create more jobs, and strengthen our economic recovery,” she said.

But Rep. Patricia Morgan, R-West Warwick, argued that various other tax and fee increases contained in the budget are bad policy. “We should be streamlining government and finding effective ways to run it, so we don’t have to keep going back to people and nickel-and-diming them to death,” she said.

The budget approved by the House totals $8.78 billion, an increase of $564 million compared with the budget approved last year. It includes a roughly $34 million increase to raise school funding under the state’s new funding formula.

As part of the budget, House lawmakers approved a cut in Rhode Island’s corporate tax rate from 9% to 7%, with the reduction in revenue more than made up for by switching to a new form of accounting for corporate taxation known as combined reporting. They also voted 68-5 to revamp Rhode Island’s estate tax by raising the exemption from around $922,000 to $1.5 million.

Lawmakers voted 62-11 to get rid of a controversial toll on the Sakonnet River Bridge by creating a new infrastructure fund to pay for transportation repairs. The money for the fund would come from newly automatic increases in the gas tax and a hike in some vehicle fees, as well as existing sources.

Lawmakers voted 11-61 to defeat a proposal by Morgan to use some of the $12.3 million allocated in the budget to pay the 38 Studios bonds to appoint a special prosecutor to investigate the deal, and later voted to make the bond payment.

House Majority Leader John DeSimone said the due diligence that he and Mattiello did showed them that not paying the 38 Studios bonds would put the state at serious financial risk. “I cannot believe that anyone of any intelligence would want that on their conscience,” he said. “We’re leaders. We’re here to represent the people.”

Rep. Michael Marcello, who lost his post as House Oversight Committee chairman after Mattiello defeated him for the speakership, said he could no longer support paying the 38 Studios bonds because both Mattiello and Fox before him had blocked a full investigation into the controversial deal, which was struck in 2010.

“We created this debacle, and yet we’re not going to get to the bottom of it in this chamber?” Marcello said. “Come on!”

Rep. Karen MacBeth, who succeeded Marcello as head of the Oversight Committee but has been prevented by Mattiello from issuing subpoenas related to 38 Studios, pledged to continue her efforts to investigate the deal.

As part of the budget, lawmakers voted overwhelmingly to authorize a new $45-million parking garage at the Garrahy Judicial Complex in Providence, with the stipulation that construction must wait until at least three parcels of the old I-195 land have been sold. They also authorized a new state nursing school to be built at the old South Street Power Station.

They voted to put a combined $248 million in bond referendums on the November ballot for voters to approve, while defeating amendments to add more for open space and the environment. The four ballot questions propose $125 million for the University of Rhode Island’s engineering school; $35 million for mass transit hubs; $35 million for arts and culture; and $53 million for clean water, open space, and healthy communities.

The House also voted 57-17 to include language in the budget that blocks Rhode Island cities and towns from instituting their own minimum wages, an apparent effort to stop Providence hotel workers’ push to get a $15 minimum wage there. “It just wouldn’t be right and it goes against just about every economic principle that there is,” DeSimone said.

The new budget would take effect July 1, the first day of the state’s fiscal year. Legislative staff members estimate Rhode Island will face large and growing deficits in future budgets due to competition for gambling revenue from new Massachusetts casinos and rising spending in areas such as health care and pensions.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi


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